October 2005 Selected Offshore News Clips

(Especially noteworthy articles’ headings highlighted in gold.)

FOR VICTIMS, REPAIRING ID THEFT CAN BE GRUELING

Paul Fairchild, a 34-year-old Web developer in Edmond, Oklahoma, has never spent $500 on fine tobacco. He has never slaked a shoe fetish with $1,500 charges at Manolo Blahnik and Neiman Marcus, nor has he ever bought diamonds online, furs in SoHo, or anything at e-Luxury.com. He has never owned an apartment building in Brooklyn, and he has never peddled flesh. Over the last two years, however, his credit report has suggested otherwise. In retelling his ordeal with identity theft, Mr. Fairchild has developed the acid sarcasm and droll nonchalance of a standup comic – a defense mechanism, his wife, Rachel, says, that belies two years of hell. “Once this happens, you can’t believe how deep the rabbit hole goes,” Mr. Fairchild said.

Indeed, in a year of prominent cases of stolen or lost consumer information – from the hacking of university computers and the disappearance of backup tapes at Citigroup, to fraudulent downloads from the databases of companies like ChoicePoint and LexisNexis – the rabbit hole seems to be getting deeper. About 10 million Americans fall victim each year to identity theft, according to the Federal Trade Commission. And in about a third of those cases, victims see far more than their existing credit card accounts tapped. Their private information is used by thieves to open new accounts, secure loans and otherwise lead parallel and often luxurious lives.

For victims like Mr. Fairchild – and two others who recounted their troubles and shared their sometimes vast paper trails – it can be an unnerving, protracted whodunit, with collection agents demanding payment for cars they have never driven, credit card accounts they never opened, loans they never obtained, and myriad other debts accrued by shadowy versions of themselves. Prosecutions are rare, and police investigations – when they do happen – are time-consuming, costly and easily stymied. A 2003 study by the Gartner Inc. consulting firm suggested that an identity thief had about a 1 in 700 chance of getting caught. “It’s a crime in which you can get a lot of money, and have a very low probability of ever getting caught,” Mari J. Frank, a lawyer and author of several books on identity theft, said in an interview. “Criminals are now saying, Why am I using a gun?”

John Roos used to be afraid to shop online. But Roos, of New Rochelle, N.Y., recently bought a $500 TV online after he discovered a little-known credit card service that allows him to give Internet retailers a substitute credit card number for his account. Offered to holders of Citi, Discover and MBNA cards, these “virtual credit cards”, or single-use card numbers, are designed to give some peace of mind to consumers concerned about credit card fraud. Although the system slightly differs on each card, the principle is the same: For no extra charge, consumers sign up at the credit card’s Web site, often downloading software on their computers. Then, when they are ready to shop, they receive a randomly generated substitute 16-digit number that they can use at the online store. The number can be used once or, in some cases, repeatedly at the same store.

“The only people who know the real number are you and us,” said Jim Donahue, spokesman for MBNA. Although initially designed for Internet shopping, the card number can also be used to buy goods and services over the phone and through the mail, but it cannot be used for in-store purchases that require a traditional plastic card. (Nor can it be used for purchases that require a credit card to be produced at the time of pickup, such as movie tickets.)

The Caribbean is synonymous with hedonism – from the mass tourist Mecca of the Bahamas to the off-the-beaten-path divers’ paradise of Bonaire. What you might not know about the Caribbean, however, is that it is also home to one of the most appealing – and inexpensive – expatriate and retirement havens in the world. This little-known gem, though off the well-trodden path taken by most travelers, has a lot to offer. So if you are longing for the good life in a tropical haven, duck the crowds and head to Dominica.

With no direct flights from North America or Europe, Dominica is welcome retreat of peace and quiet in the Caribbean’s sea of mass tourism. Roughly halfway between Martinique and Guadeloupe, the island is splendidly underdeveloped. A land of waterfalls, rivers (365 of them), hot springs, and lush rain forests, Dominica is the Caribbean’s most rugged isle. Instead of luxury resorts and long stretches of crowded white sand beaches, you will find volcanic mountains, intimate beaches, little-explored reefs and small hotels.

And unlike most of the Caribbean’s islands, which cater to tourists and the high-end market, Dominica’s prices are refreshingly down-to-earth. For example, right now you will find a beautiful private 1.7-acre lot with ocean views for only $37,000, and a 1/2-acre lot with ocean views located only 15 minutes from the airport with an asking price of $50,000 – both perfect places for your dream home (which can be built for as little as $24,000-$40,000). Also: a 4-bedroom fixer-upper overlooking the ocean for $97,000; a stunning 3200-sqare foot home with 4-bedrooms and 3.5 baths on 1/4 acre lot with ocean views for $229,000; a 2.15-acre riverfront lot with cocoa, coffee, grapefruit and bamboo trees on the property waiting for your dream home for $105,000; and a nice 2-bedroom home with fruit trees (pineapple, avocado, etc.) on the property, close to beaches and waterfall can be yours for only $100,000 or best offer. A fully-furnished 2-bedroom, 1-bath starter home rents out for $562 a month – only a 15-minute drive to the capital. Residential telephones and cell phones are reliable and high-speed Internet access is readily available.

Outside of the costs, there are other reasons to consider Domnica, including fishing, snorkeling, ocean diving, swimming and bathing in any of the hundreds of area rivers, waterfalls and natural hot springs, and exploring lush tropical mountains and valleys as beautiful as anything you have seen anywhere in the world. Exotic cuisine and some of the best seafood in the world can be had for as little as $5 per person.

One of the first persons I met after starting at the magazine was Pedro Sarasqueta. He has become an excellent resource for me and many expats on how and why to invest in Panama. Pedro was the first contact for many of the expats that now live in the residential development Altos del Maria. He is the best I have seen at getting you, the expat, from A to B to Z in Panama, so he is someone you should talk to if you are thinking about moving to Panama or even just visiting with an idea of staying.

Pedro graduated with a Master’s degree in Geology from Christian Albrecht Universität in Kiel, Germany. He speaks fluent German and English. He was nominated Business and Tourism Attaché to the Panamanian Embassy in Germany from 1995 to 1999. When he returned to Panama in 1999, Pedro worked with the residential project Altos del Maria, which is located in the mountains one hour from Panama City. And today he has set up his own company, Panama Realty Corporation, which is designed to help people buy property in Panama or relocate to Panama. His wife Petra is German and has worked with the UN in Europe and as a German tutor in Panama.

I have turned to Pedro in this article in order to answer many questions that readers have asked me over the past few months – I hope the interview will shed light on subjects that I have not yet touched on in my articles. If not, contact Pedro. In the end I think that living in Latin America is a good idea for anyone; at least having a place here is a good idea. In the future this will be the best of the global neighborhoods. Low population, good water, a fairytale landscape, individual liberty, low cost, modern, yet not too modern and completed. Far from the centers of world conflicts and politics … in other words, a place to escape to that really feels like an escape.

Exit strategy is very important. Recently a producer from MSNBC contacted me about the disappearance of Patrick McDermott wanting to know if it was possible if he just disappeared. Anything is possible; however, just walking away is unlikely. If you are looking to move on, disappear or simply start over you need a good exit strategy. For several years, I have been giving advice on how to disappear. I receive emails from many people with questions ranging from property information to medical questions. When you break it down disappearing is simply starting over again, no different then loading that U-haul and having a checklist at hand.

First thing, you have to determine is how you are going to make money when you get to your predetermined location. If you are a bartender, waiter or cabana boy most likely, you will be able to get a job off the books and keep yourself under the radar. If you got tons of dough and plan on day trading or swing trading your even in better shape. Since you can set up offshore corporations and trading accounts easily and legally. It is important you research your location for job opportunities as well as the legalities of an expatriate working in the country. Some countries appear inexpensive to live in, keep in mind there is a reason why. Typically, the wages paid and the comforts of home are not up to par as in the U.S. This does not mean you will not find yourself an offshore haven, just tread carefully.

When buying that new condominium, house or beachfront properties there are important questions you need answered. Is there a transfer tax? When does it need to be paid and in what currency? The beachfront land, find out if electric and water can be run there. What are your rights if you leave for two months and come back and there are squatters occupying your new home? Find out what types of property insurance is available, if any. Do not buy anything sight on seen, like some great piece of property advertised for ten grand. If you have not been, there you have not seen what is down the block or across the street.

What and who are you leaving behind depends on your exit strategy. Are you simply looking for a new life and escaping the EX? If so, tidy up your affairs and get rolling. You do not want to leave bad credit behind – you may have to come back someday. Do the best you can to pay what needs to be paid. When I work with clients who want to disappear some of them desire to trash their credit, not pay off their electric and leave the bills unattended. Big mistake, look where you were five years ago, you probably did not think you were going to be thinking about disappearing today. You do not know what your situation will be like in five years from now. Some of my clients have fled because of debt, I suggest they deal with it properly, file bankruptcy, arrange with creditors. Do not toss your bills into the wind. Remember some skip tracer might find you in your offshore haven.

I get questions about second passports a lot. My answer is simply they are useful for types of identification intra-country in South or Central America but I would not try crossing a U.S., Canadian or European border with one. Read, read, read about offshore living from sites such as this. The above are a few thoughts one should consider if leaving or disappearing. Good luck and enjoy your new life, remember a little offshore living is a good thing but a lot of beach living is a better thing.

Computers and their criminal investigation capabilities turned Dori Schulze, an IRS special agent, into a self-proclaimed “geek” by the early 1990s. That initial embrace of computers by her and her employer led to the largest retail tax evasion conviction at the tim. She used a computer to gather evidence against Stew Leonard Sr., the founder of Stew Leonard’s Dairy in Norwalk, who was convicted of evading $6.8 million in taxes in 1993. Now, the knowledge and tools the IRS uses to crack cases ranging from fraud to tax evasion are being taught to local and state law enforcement departments. The goal is to use the same tools to look deep into the hard drive of a computer for evidence in cases ranging from child pornography to public corruption.

That is what a mix of local and federal law enforcement officers gathered to learn at the FBI’s New Haven, Connecticut office. Sitting in front of rows of desks with computers, 20 people were taken step by step through the IRS’ Ilook Investigator program. “Just about every crime committed these days … there’s a computer,” U.S. Attorney Kevin J. O’Connor told the group, opening the two-day training session with officers from cities and towns statewide as well as the U.S. Coast Guard. The percentage of criminal cases involving evidence found on a computer has grown from 5% to 95% over the last decade, the FBI and IRS said. And agents often must deal with multiple computers in a network.

The Ilook program was initially developed by Elliot Spencer, the head of forensic computing for the UK’s anti-fraud agency. It allows investigators to take an “image”, or exact copy, of another hard drive. With that copy, investigators can recover destroyed files and search the computer thoroughly. The IRS Criminal Investigation Division joined with Spencer to further develop the program in 2001, and versions of it are available to law enforcement and other government agencies. While the IRS can, for example, use the program to more easily uncover a double set of financial books in a fraud case, local police and other federal agencies can use it to find records detailing drug trafficking and organized crime.

Terrorists, drug dealers and smugglers are using a global system as old as the Silk Road to finance their operations. And there is not much we can do about it.

When federal authorities busted Abad Elfgeeh two years ago, they thought they had broken a critical link in the chain of terror financing. Between 1995 and 2003 the Yemeni immigrant and a group of family members, friends and associates sent $22 million by way of a JPMorgan Chase bank account to countries all over the world, including Pakistan, Thailand and Yemen. Among the alleged recipients: Mohammed Ali Hassan al-Moayad, a Yemeni sheikh who boasted of his ties to Osama bin Laden and was sentenced in July to 75 years in federal prison for conspiring to finance Hamas and al Qaeda. In court filings federal prosecutors in Brooklyn, N.Y. cited stunning evidence of a damning relationship between the men. But as the trial got under way in mid-September, prosecutors were forced to make do with far lesser charges. The indictment made no mention of terrorism. Instead, Elfgeeh was found guilty of five counts, including operating a money-transfer business without a license and avoiding currency-reporting laws.

For law enforcement this case highlights one of the most difficult and frustrating aspects of battling international terrorism: following the flow of money that supports it. Funds used to underwrite terror frequently start off “clean” and become “dirty” much later. The sheer size of the global financial industry has confounded prosecutors’ attempts at untangling the illegal use of money transfers from the innocent one of sending money home for relatives’ living expenses. Tracing any of the money to an individual in a remote corner of the world is all but impossible, and just as U.S. and other Western investigators clamp down on one sort of mechanism, terrorists figure out a new scheme.

Particularly vexing is the kind of business Elfgeeh ran out of the Carnival French Ice Cream Supermarket:hawala, an informal money-remittance service that operates on the fringes of the global financial system. Faster and cheaper than traditional banks or companies like Western Union, these outfits reach parts of the world others cannot and are a lifeline for the millions of immigrants and guest workers living in rich countries who send money back home. Last year an estimated 35% of the $150 billion in global transfers to developing countries flowed through these channels – and possibly far, far more.

It is not plausible to simply shut down the entire hawala industry. Families back in the home countries would starve. And yet the authorities cannot ignore the ugly side. Hawala is exploited by criminals to launder funds from traffic in immigrants, illegal drugs, sex slaves, weapons and even body parts. The system is marked by trust and informality, and operators are as sketchy with their records as any bookie – they have nothing but a scribble of first names or code words and a few details of the transaction. Where the funds end up – and what they are used for – is often a mystery to everyone but the recipient.

Police states are easier to acquire than Americans appreciate. The hysterical aftermath of September 11 has put into place the main components of a police state. Habeas corpus is the greatest protection Americans have against a police state. Habeas corpus ensures that Americans can only be detained by law. They must be charged with offenses, given access to attorneys, and brought to trial. Habeas corpus prevents the despotic practice of picking up a person and holding him indefinitely.

Americans may be unaware of what it means to be stripped of the protection of habeas corpus, or they may think police authorities would never make a mistake or ever use their unbridled power against the innocent. Americans might think that the police state will only use its powers against terrorists or “enemy combatants”. But “terrorist” is an elastic and legally undefined category. When the President of the U.S. declares, “You are with us or against us,” the police may perceive a terrorist in a dissenter from the government’s policies. Political opponents may be regarded as “against us” and thereby fall in the suspect category. Or a police officer may simply have his eye on another man’s attractive wife or wish to settle some old score.

The PATRIOT Act has given the police autonomous surveillance powers. These powers were not achieved without opposition. Civil libertarians opposed it. Bob Barr, the former U.S. Representative who led the impeachment of President Clinton, fought to limit some of the worst features of the act. But the act still bristles with unconstitutional violations of the rights of citizens, and the newly created powers of government to spy on citizens have brought an end to privacy.

The prohibition against self-incrimination protects the accused from being tortured into confession. The innocent are no more immune to pain than the guilty. The prohibition against torture has been breached by the practice of plea bargaining, which replaces jury trials with negotiated self-incrimination, and by sentencing guidelines, which transfer sentencing discretion from judge to prosecutor. Plea bargaining is a form of psychological torture in which innocent and guilty alike give up their right to jury trial in order to reduce the number and severity of the charges that the prosecutor brings. The prohibition against physical torture, however, held until the invasions of Afghanistan and Iraq. Everyone is disturbed about this barbaric and illegal practice except the Bush administration. It will be a short step from torturing detainees abroad to torturing the accused in U.S. jails and prisons.

In the Anglo-American legal tradition, law is a shield of the accused. This is necessary in order to protect the innocent. The accused is innocent until he is proven guilty in an open court. There are no secret tribunals, no torture, and no show trials. Outside the Anglo-American legal tradition, law is a weapon of the state. It may be used with careful restraint, as in Europe today, or it may be used to destroy opponents or rivals as in the Soviet Union and Nazi Germany.

When the protective features of the law are removed, law becomes a weapon. Habeas corpus, due process, the attorney-client privilege, no crime without intent, and prohibitions against torture and ex post facto laws are the protective features that shield the accused. These protective features are being removed by zealotry in the “war against terrorism”. The damage terrorists can inflict pales in comparison to the loss of the civil liberties that protect us from the arbitrary power of law used as a weapon. The loss of law as Blackstone’s shield of the innocent would be catastrophic. It would mean the end of America as a land of liberty.

If you are planning to move or if you have homes in more than one state, watch out. States are getting ever more creative about collecting income tax from people who have any ties to their territory. Even states without income taxes are getting into the act, with sales- and use-tax audits. Upping the stakes in the residency wars. Many states’ estate taxes, invisible and painless until a 2001 change in federal law, have since become real burdens because the federal estate tax credit that used to be available to offset them is now gone. What makes residency particularly tricky is that each state has its own set of rules.

Here is how to leave a state – and its taxes – behind.Just moving out of your old state is not enough. You need to show you have cut your old roots and planted new ones elsewhere. “It used to be you could just change your driver’s license and register to vote in your new state and the domicile fairy spread her dust,” says New York tax lawyer Mark Klein. “Now auditors say anyone can fill out a piece of paper; you have to really change your lifestyle to overcome the burden of proving residency.” That means you should not double dip. Minnesota physician Roger Dreyling filed as a nonresident, claiming he was domiciled in state-income-tax-free Alaska. But he continued to claim the “homestead” property tax break on the Minnesota house where his wife remained. And while he got an Alaska driver’s license, he kept his “surrendered” Minnesota license and used it to get cheaper resident fishing and hunting licenses there. A judge concluded that Dreyling merely “went through the motions of trying to establish a domicile [in Alaska] to avoid his Minnesota tax liability” and that the center of his family, business and social life remained in Minnesota.

RESERVE BANK OF AUSTRALIA WARNS OF “MELTDOWN” OF GLOBAL FINANCIAL SYSTEM

Further rises in oil prices, the collapse of a major bank or an unexpected jump in inflation could be all it takes to send the increasingly fragile global financial system into meltdown. The RBA warned that the current calm in financial markets could be the prelude to a storm that could wreak havoc in the world economy. The RBA believes the boom in markets for shares, bonds and housing in many countries is unsustainable. The warning came as share prices in Australia reached a new high point, while a rush to invest in Australian bonds is pushing down long-term interest rates. “The preconditions are in place for quite abrupt swings in sentiment and a disruptive snap-back in pricing,” the central bank says in its latest review of the health of the financial system.

And the RBA says a key measure of all the world’s share markets is now 62% higher than its 2003 nadir, with the biggest gains made in the riskiest markets. The bank says that financial markets have been acting on a belief that there will be no sharp changes in interest rates around the world. This has resulted in huge investments in government bonds. The belief that rates will remain stable has made investors more willing to borrow to buy shares and bonds.

And with long-term interest rates at historically low levels, investors in international financial markets – such as insurance companies, banks and superannuation funds – have been seeking out riskier assets that pay higher returns. The trend for people to borrow more heavily than before has extended to housing markets, which are still booming in many countries around the world. “The concern is that the increase in prices and leverage across a range of asset markets might be sowing the seeds for future problems,” the RBA says. “In many markets, there seems to be considerably more scope for asset prices to fall than to increase.”

As many as 1 out of 3 people who have died from disease in the last 40 years did so needlessly because of a single law passed by Congress in 1962! Here is my “insider” story. For 19 years, I was a research scientist with the Upjohn Company, a mid-sized pharmaceutical company. I once joked that we were so busy complying with superfluous regulations, we had little time to discover new drugs. Unfortunately, it is no laughing matter.

In 2003, enough studies had been published on the 1962 Kefauver-Harris Amendments to estimate the true cost of these FDA regulations. Researchers had long suspected that they had thwarted innovation, driven up drug prices, and delayed the introduction of life-saving pharmaceuticals. Prior to the passage of these Amendments, the FDA primarily regulated only drug safety. The Amendments gave the FDA authority over drug manufacturing, advertising, animal studies, and the design of clinical trials. The result was predictable: the time it took to take a drug from the laboratory to the market went from 4½ years to 14½ years. Because patent life was 19 years or less, manufacturers had insufficient time to recover their costs before a drug went generic. In 1984, Congress passed the Waxman-Hatch Act, which partially restored the patent years destroyed by regulation. The act estimated that regulations were responsible for a whopping 84% of the 14½-year development time. Prior to 1962, about 15% of the development time was consumed by regulatory requirements.

The amendments might have saved, at best, 7,000 lives. In contrast, many more died waiting the extra 10 years for life-saving drugs. According to my calculations, about 4.7 million people died over the last 40 years while the life-saving drug they needed was tied up in regulatory red tape! Unfortunately, that is just the beginning. The amendments have destroyed at least half of the industry’s innovative capacity, preventing some life-saving drugs from ever reaching the market. The death toll from losing half of our innovations from 1962 to 2003 is somewhere between 4 and 16 million people depending upon the assumptions used. Adding the 4.7 million deaths due to an extra 10 years of development time suggests that as many as one out of three people who died of disease since 1962 may have done so needlessly.

The 1962 Kefauver-Harris Amendments may very well be the deadliest law that Congress ever passed.

The U.S. has embarked on a massive effort to create a secure digital driver’s license system by early 2008 but some experts warn that the plan may be hugely expensive and lead to chaos. Congress passed the Real ID Act last May and gave states three years to implement it. It laid out minimum national standards for licenses, which will have to include a digital photo, anti-counterfeiting features and machine-readable technology.

States will have to verify all documents presented to support license applications, such as birth certificates, Social Security cards and utility bills, with the issuing agency, and will be required to link their license databases so they can all be accessed as a single network. States will also be required to verify that a person applying for a license is in the country legally. They will have the option of issuing a separate credential to illegal aliens so that they will still be able to drive. All but 11 states now require that drivers licenses be issued only to citizens or legal residents, but many do not verify applicants’ identities.

“This law has the potential for huge bureaucratic and technical problems,” said Cheye Calvo of the National Conference of State Legislatures. “This law was written by people who didn’t take the time to understand how these things are done and didn’t even hold any congressional hearings,” he said. Supporters say the act was necessary because several of the hijackers who attacked New York and Washington on Sept. 11, 2001, had obtained licenses fraudulently which they then used to board planes.

Calvo wonders if the act can be implemented at all. “Whether states will be able to verify so many millions of documents at all, much less in a timely manner, is in question,” he said. Meanwhile, Hispanic groups, immigrant advocacy organizations, civil liberty and privacy groups still hope to derail the act, perhaps through litigation, or by creating a groundswell of opposition that will force Congress to modify or repeal part of the law.

Ketchum, Idaho, is the kind of place where people tend to know each other. Close to the Sun Valley ski resort, the tony town of 3,873 boasts several Wall Street refugees who manage money for wealthy neighbors and clients elsewhere. Yet few residents say they know John Whittier, a 39-year-old money manager who moved to the area about five years ago and opened an office for his fledgling hedge-fund firm, Wood River Capital Management, named for the picturesque river that runs through Ketchum.

Investors in Wood River’s funds apparently did not know much about Whittier, either. The ex-stock analyst at investment bank Donaldson, Lufkin & Jenrette presented himself as a savvy stock trader overseeing hundreds of millions of dollars for investors. Marketing materials for his flagship fund trumpet 25% returns in the first eight months of this year, a period when the stock market was basically flat. But some investors got nervous and tried – unsuccessfully – to get their money back late last month when Whittier’s big bet on an obscure Silicon Valley stock slumped badly, say investors’ lawyers. The firm stopped answering its phone. Last week, Wood River’s offices in downtown Ketchum were locked and apparently unoccupied.

The full picture of what unfolded at Wood River is not yet in focus. Whittier and others at the firm remain incommunicado. But the case clearly illustrates the perils of a secretive sector of the investment industry flooded in recent years by institutions and wealthy individuals hungry for outsize returns. Other potential danger signs included Whittier’s self-proclaimed transformation from low-profile analyst to would-be investment seer. Financial industry veterans fear Wood River will not be the last of its kind to fizzle.

At the risk of raising some eyebrows – globalization of what? The other question is – how long will this form of it last? Both are answerable. In my own recollection, the term might have gained visibility as a social buzz phrase at one of the 1990s’ Davos gatherings of intellectual speculators. It also seemed to arrive with the acronym NGOs. Some eventually figured out that most non-governmental organizations exist to lobby governments to do what governments want to do, which is to expand expenditures and power. Of course, and to be serious, the best way to understand a social buzz-phrase is to look at those who are against it and those who are for it.

The left is distressed by the new globalization so it must be good. Confirmation of this can be provided by looking at the old globalization movement that was so popular with politicians, neurotic intellectuals, academics, and so many leading newspapers during most of the 20th Century. By far, the most persuasive movement was the global expansion of international socialism – more precisely known as Communist International or Comintern. The spread of doctrinaire authoritarianism through most of the 20th Century has been the most invidious and powerful such movement since the Catholic Church was corrupted into a bureaucratic monster in the 1500s.

The purpose of this brief address is to outline that the transition from global authoritarianism to increasing regionalism, personal freedom, markets, and international trade is not new. It has happened before and, because the left is so accustomed to having its way – often brutally – the transition has not been easy and will not be easy. Like rusting cars, arbitrary intervention never sleeps.

Given the details of the duration and the symptoms of the collapse of the two previous tyrannical centuries, it is possible to derive some conclusions about this phase of globalization. Will the trend away from collectivism towards the sovereignty of the individual continue to work out? After all, under Clinton in the U.S., Chretien in Canada, and with Schroeder and Chirac in Europe, the last decade of credit inflation and booms has seen a revival of ambitious neo-authoritarians. Historically, the surrender of centralized power to the individual has occurred on the contractions following huge asset inflations. Obviously, the world is eligible for a contraction that could be more deep and widespread than the one that followed the inflation in tech stocks in 2000. In which case, politics should resume the great reformation symbolized by the fall of the Berlin Wall. While there is no guarantee that this reformation will continue, there is no guarantee that it won’t. Now is about the time when the antidote to the disease of central planning is due to resume its liberating course.

For the good of homeland security or other law enforcement use, would most Americans give their Social Security and driver’s license numbers, among other personally identifying information, to the FBI or other law enforcement agencies? The fact is, Americans release such information daily, whether they mean to or not. Send a package via FedEx and it usually gets there on time. End of story, right? Wrong.

FedEx keeps people’s personally identifying information in a database and makes it available to the FBI for homeland security purposes. Furthermore, a growing number of data aggregators – otherwise known as data brokers – collect citizens’ personally identifying information and sell it for profit. Among the organizations buying this information are law enforcement agencies, which increasingly turn to the private sector for help with improving intelligence and aiding criminal investigations.

“Thirty years ago, we were concerned about the big, bad federal government and what it was doing,” said Lee Strickland, director of the Center for Information Policy at the University of Maryland and former Central Intelligence Agency analyst. “Now it’s really the commercial entities, and not just the data aggregators, but any company.” Data aggregators such as ChoicePoint, LocatePLUS and Seisint – which was acquired in 2004 by LexisNexis – collect information from a multitude of public and private source, and assemble dossiers on many, if not most, Americans. Then they sell that information to government agencies, such as 50 different Massachusetts police departments and the Florida Department of Law Enforcement (FDLE), which use it for everyday law enforcement investigations.

A swiss bank account was once synonymous with wealth, mystery, and individual sovereignty. Offering investors complete anonymity, this fabled financail fortress seemed unassailable. It placed assets far beyond the reach of creditors, tax collectors, ex-spouses and plaintiffs. Today, this and similar strongholds such as Panama, Lichtenstein and the Cayman Islands are under siege. With broad powers born out of policy wars against drugs, terrorism, and money laudering, the U.S. can unearth and examine the most private financial matters of its citizens almost anywhere in the world. Yet, despite its best efforts, the government has failed or chosen not to eliminate some of these safe harbors.

In the article, we examine the current state of offshore asset protection. We scrutinize the various legal options investors can still use to safeguard their wealth in foreign countries. And we recount the stories of individuals who, for a variety of reasons, chose to relinquish their U.S. citizenship.

The most revered figure in American finance happens to be an aging price controller. Until the end of January the price of a short-term loan – the federal funds rate – will be whatever the chairman of the Federal Reserve Board decides to make it. Never mind the conundrum of a flattish yield curve, where 10-year Treasurys now yield only 0.6 percentage points more than the funds rate. Alan Greenspan, 79, is a conundrum himself, personally: capitalist price controller, Ayn Rand-trained public servant and, most oxymoronic of all, beloved central banker. His imminent leave-taking presents an occasion both to appraise his 18-year Fed stewardship and, more important, to speculate on its consequences to all who hold, save or invest the U.S. dollar.

Many have preceded the chairman in the work of overriding the market’s judgment with their own, and they have usually toiled in obscurity. These were fixers of New York City rents, of interstate rail rates and even, under the Nixon Administration, of nearly every price and wage under the American sun. With the regulatory enlightenment that followed the disastrous Nixon controls, the burden of proof began to fall on those who would intervene. Except, that is, in the wholesale-dollar money market. For reasons about which thoughtful investors are remarkably uncurious, the Fed continues to fix an interest rate that lenders and borrowers might better discover for themselves.

Ours is a faith-based financial economy. Investors have always had to trust somebody or something, whether an accountant’s numbers or a counterparty’s solvency. But they have not always had to make a leap of faith about a nation’s irredeemable paper currency. Up until Aug. 15, 1971 the dollar was exchangeable into gold at the rate of $35 to the ounce, a privilege admittedly limited to governments and central banks. The lip service paid to the convention of gold convertibility at least represented an official commitment to not overuse the monetary printing press. Without such a system, a currency holder must trust in people, or – in the case at hand – one person.

Greenspan is trusted as few central bankers (and probably not one admitted price controller) have ever been before. Recently writing in the Financial Times, Harvard economist Kenneth Rogoff crowned the chairman “the Michael Jordan/Lance Armstrong/Garry Kasparov of modern-day central bankers”. Princeton economist and former Fed Vice Chairman Alan Blinder extravagantly seconded Rogoff. Chairman Greenspan is unique in one way: The people have acclaimed him an oracle. His prophesies rivet everyone, even if no one can parse what he is saying.

Do not expect the people to confer such oracular status on his successor. They will come to see that the next chairman is unable to predict the future and improve it before it can happen. Even the nimblest practitioner of the art of interest-rate management is sooner or later bound to run out of luck. And feeling betrayed, people will retroactively demote Greenspan, his celebrity notwithstanding, and shred his reputation for infallibility. He falls as short of the old papal standard as any private economist, financial journalist or central banker who ever uttered a forecast. The early-1990s real estate and banking difficulties caught him looking the wrong way. So did the excesses and imbalances of the late-1990s stock market bubble. In pushing the funds rate to 1% to forestall an imagined deflation in 2003, Greenspan hit his wall. As yields go higher and higher, bondholders will eventually hit theirs. The case against Greenspan is not that he makes mistakes but that he makes unnecessary ones.

Greenspan, however, has conflated price control with economic czardom. He has intervened early and often – “preemptively” – to achieve his macroeconomic objectives. Greenspan, an inveterate speech-giver, has pushed investors to take risks that he now counsels against. He delivered his famous “irrational exuberance” line in 1996, when he warned that the market was getting too frothy. Then he switched course and lent the prestige of his office to the dubious proposition that, in effect, the exuberance was not so irrational after all. He became as great a financial seducer and as ardent a New Era zealot as any analyst, broker or investment strategist on Wall Street. Even stranger was the advice he vouchsafed to the home-buying public in February 2004. Adjustable-rate mortgages can save you money, he said. Four months later the Fed began to push the funds rate upward.

Interest rates are the traffic signals of a market economy. Red, green or amber, they direct the flow of investment funds. One motorist might dream of never encountering a red light as he sails through intersection after intersection. But woe betide this driver if everybody else could cruise through, too. There would not be enough tow trucks. Since it swung into antideflation mode in 2002, the Fed, in effect, has turned every interest-rate light green. Bond yields plunged (then rose), credit spreads have tightened, and the yield curve has flattened. A new industry of speculative-grade mortgage lending has sprung into existence. And the inevitable credit pileups in the streets and intersections of finance will be Greenspan’s successor’s problem to clean up.

Greenspan leaves office amid a ferocious bull market in houses (with a little recent softening around the edges). This is on his conscience, as it should be. After all, he is one of its creators. To preserve the nation from an imagined deflation, the Fed instigated a real estate and mortgage inflation. And who is financing it? Why, the Asian central bankers are. They are the ultimate source of the cash in the cash-out refinancing wave, as Greenspan acknowledged in a speech in August.

Adjustments there will certainly be, no matter who succeeds Greenspan. Home with his wife watching CNBC, the retired chairman may see strange and troubling occurrences: rising interest rates, a falling dollar, a bear market in residential real estate, a rising gold price. And though tempted to interpret these disturbances as the markets’ expression of loss at his exit (he is, of course, only human), Greenspan on reflection may finally see the truth. He was, in fact, no oracle, after all.

Congressman Ron Paul has accused the Bush administration of attempting to set in motion a militarized police state in America by enacting gun confiscation martial law provisions in the event of an avian flu pandemic. Paul also slammed as delusional and dangerous plans to invade Iran, Syria, North Korea and China. Ron Paul represents the 14th Congressional district of Texas. He also serves on the House of Representatives Financial Services Committee, and the International Relations committee.

Paul appeared on the Alex Jones show and raised some interesting points about the possibility of imminent indictments of top Bush administration figures. “I think there’s a lot more excitement coming and it’s not going to be good for the Republicans,” stated Paul. “The things that I hear have to do with Karl Rove and Abramoff and that’s much much worse than anybody would believe and it involves DeLay as well.”

On the subject of the police state, Paul stated, “If we don’t change our ways we will go the way of Rome and I see that as rather sad. … the worst things happen when you get the so-called Republican conservatives in charge from Nixon on down, big government flourishes under Republicans. It’s really hard to believe it’s happening right in front of us. Whether it’s the torture or the process of denying habeas corpus to an American citizen. I think the arrogance of power that they have where they themselves are like Communists … in the sense that they decide what is right. The Communist Party said that they decided what was right or wrong, it wasn’t a higher source.”

Paul responded to President Bush’s announcement last week that he would order the use of military assets to police America in the event of an avian flu outbreak. “To me it’s so strange that the President can make these proposals and it’s even plausible. When he talks about martial law dealing with some epidemic that might come later on and having forced quarantines, doing away with Posse Comitatus in order to deal with natural disasters, and hardly anybody says anything. People must be scared to death.” Paul, himself a medical doctor, agreed that the bird flu threat was empty fearmongering.

President Bush informed the nation, during a press conference, that he might seek to use the U.S. military to quarantine parts of the nation should there be a serious outbreak of the deadly avian flu that has killed millions of chickens and 60-some people in Southeast Asia. That is the second time Bush has expressed a desire to use the military for local policing. The first was in the wake of Hurricane Katrina. The Posse Comitatus Act (18 U.S.C. 1385) generally prohibits federal military personnel and units of the U.S. National Guard under federal authority from acting in a law enforcement capacity within the U.S., except where expressly authorized by the U.S. Constitution or Congress.

Enacted during Reconstruction, the purpose of the Posse Comitatus Act was to severely limit the powers of the federal government to use the military for local law enforcement. Would Americans tolerate such a gigantic leap in the federalization of law enforcement? I am guessing the answer is yes. In the name of safety, we have undergone decades of softening up to accept just about any government edict that our predecessors would have found offensive. Let’s look at some of it …

If you are not sure why you need an offshore bank account, consider the scandal that is rocking British banks right now. Many big English banks outsource their back office work to India – and a reporter who went to Bangalore was able to purchase top-secret information on thousands of personal accounts. He bought it from low-paid call center employees who had nothing to lose and no misgivings about selling account holders’ addresses, secret passwords, credit card details, drivers’ licenses – even passport numbers! Plenty of American and European banks use back office services in India as well. If you value your banking privacy and security, consider an offshore account in Panama, Austria, Switzerland, Liechtenstein, or Denmark. Each has its own unique features. Let us look at them one by one…

Over the years, many people have asked me why I expatriated. Critics of course will sarcastically ask, “Were you a failure in your previous country, and that is why you left?” Or, similarly, critics may pass the comment that an expatriate is some sort of malcontent or a selfish tax-dodger. Regardless if you are intrigued or just a bit curious as to why someone may elect to relocate to another country, there are some commonalities among most people that do decide to leave and expatriate.

To start off, it should be made clear that we are talking about middle class and professional people that have decided to migrate someplace else. Included in this group also are what I like to call the self-made man or woman – education alone is not the common thread. But they do have something in common in terms of income levels AND the fact that they are independent spirited or entrepreneurial minded. In addition, it is a case of discussing people, like myself, that were living in a so-called wealthy and modern democracy and for some reason, felt like something was going wrong, or shall we say, headed in the wrong direction. So, to be more precise, the conversation surrounds individual citizens from the U.S., Canada, Europe, Australia, and so on that WERE (and maybe some still are) living in these respective places – who are a group of people that now want OUT. The question is not why are the poor people still trying to chase the so-called dream of living in a modern and wealthy country, but rather why are the citizens of the modern and wealthy country skipping town? Are these people crazy? Are they selfish? Are they simply concerned about the future?

I started to work in the financial services industry, on Wall Street in New York City to be exact, when I was a fairly young man. I was a Barry Goldwater Republican, living in the comfortable ranks of the middle class, at least so I was told in terms of where I was classified by my income, according to the U.S. government tax authorities. To be sure, many people had it better than me, but then again, I had it better than a large number of other people also – so why complain? I have discovered that expatriates are not born but rather they are created over time. …

On the eve of what could be a final Commons vote on the Identity Cards Bill, leaked Government strategy documents show that it intends to use ID cards as the basis of a transformation of the relationship between individuals and institutions with central government, with personal data farmed out for official use. Phil Booth, NO2ID’s national coordinator, said, “We told you so. This shows the extent of ambition in the deceptively-named ‘Identity Cards’ scheme. Whitehall wants to abolish privacy – not only to observe and control every individual’s relationship with any public sector organization, but every personal and commercial relationship too. With no public awareness or backing, and with no safeguards it is a recipe for totalitarian levels of control – cyber-Stalinism.”

The proposals say, “The opportunity from information sharing will be clarified and rolled out, balancing the potential value to the customer or taxpayer with privacy concerns.” Campaigners say this is code for abolition of personal privacy as we know it. NO2ID is calling for consultation to start again from the beginning, with all civil society and business groups given a fair hearing. Matthew Taylor MP, Parliamentary spokesman for NO2ID, said, “This potential invasion into personal and commercial privacy has just not been discussed. We’ve had the public and MPs fed endless spin about immigration, crime and terrorism, only for a much bigger agenda to emerge at the last minute. … It is the most astonishing power-grab since Henry VIII.”

On October 18 the ID cards Bill returns to Parliament for its report stage. It is surprising that this profoundly ill-conceived measure has got this far, so unanimous has been the opposition to it from every qualified organization in the country, apart from the police and the biometric data companies who stand to make billions of pounds if it becomes law –— anything from £5 billion (the Government’s estimate) to £18 billion (The Financial Times’s estimate), all to be borne by the public.

The evidence given to MPs during the Home Affairs Committee’s consideration of the proposals overwhelmingly demonstrated that ID cards would be ineffective, costly and a gross violation of civil liberties, yet the Home Secretary insists on pressing ahead. It is startling to read the transcript of that evidence and to see how completely its careful and serious objections have been disregarded by Charles Clarke.

Rather than reducing crime, the scheme will generate a new criminal industry devoted to stealing and forging ID cards, rather as Prohibition created a huge criminal bootlegging fraternity. For criminals are entrepreneurs and as soon as something is turned into a marketable commodity – in this case, identities – they will seek to profit from it. Forged cards might not fool forensic experts, but in most cases they will not be recognized by bank clerks and shop assistants, so their effect on fraud will be minor.

In light of the ineffectiveness of ID cards for any of the purposes that the Government has variously mooted for them, as shown by the expert testimony to the Home Affairs Committee, this will mean that some of our most fundamental civil liberties, won slowly and painfully over centuries, will be lost in the interests of an expensive white elephant.

A recent government order mandating that voice over internet protocol services must include the same government-approved wiretapping capabilities as traditional phone companies threatens to cripple peer-to-peer telephone innovation, according to new warnings from civil liberties groups and an internet telephony pioneer. The new rules from the FCC were published last month and take effect November 14, though companies have 18 months to comply. The order expands a controversial 1994 law known as the Communications Assistance for Law Enforcement Act (CALEA), which required phone companies to buy or retrofit switching equipment to meet stringent, government-approved wiretap standards that permit law enforcement to more easily wiretap digital phone calls, and to capture information such as voicemail PINs typed on a phone after a call is completed.

Under the new order, VOIP services that can both dial into, and be called from, the traditional phone network also have to comply with the costly requirements, pulling services like AT&T CallVantage and Vonage into the wiretap regime. Critics say the rules make it harder for new U.S. internet telephony companies to get off the ground. “What the FBI has asked for, and what the FCC has to date given them, would require any new developer of a voice-based technology to submit their application for the FBI’s approval before even one single person on the internet can try it,” said John Morris of the Center for Democracy and Technology. “If the FCC continues to give the FBI every power it asks for, we will see a tremendous diminution of innovation in the United States and innovation will move overseas to places that are more supportive of small innovators.”

The ruling could be particularly troublesome for companies using a peer-to-peer architecture that does not route calls through a central server, and which may not technically be able to comply. The FCC order says that all calls on such a system – not just the ones to and from the traditional network – have to be wiretappable using CALEA standards. The end result, according to Jeff Pulver, who co-founded Vonage and runs a free P2P internet telephony service called FWD, is that the rules “take away our freedom to innovate and take away inspiration for people to be entrepreneurial in this space. This comes at a time when it’s most susceptible to being screwed up. … The technology is still in its adolescence. This is a transformational current – we are talking about the communications and computing industry transforming into something that has never existed before. This is not your parents’ telecom service.”

The ruling appears to pull in the best-known P2P telephone service, Skype, which eBay recently purchased for $2.6 billion. Skype offers optional pay services called SkypeIn and SkypeOut that permit customers to receive calls from, and make calls to, the traditional phone system. That means it will have to re-engineer its system to make its customers wiretappable, even during free peer-to-peer calls between Skype users – something that might not be possible.

Today’s cruise ships are sights to behold, drawing crowds of onlookers whenever they glide into port. Completed in March 2002, The World is less a cruise ship than a one-of-a-kind floating condo, a collection of private residences at sea – a where buyers require a minimum net worth of $5 million, and unit rentals start at $1,000 per night. It boasts 165 apartments, 106 of which are fully equipped with kitchens built in steel boxes. (In case of fire, the resident pushes an alarm, sending hidden-in-the-ceiling steel doors to the floor, thus starving the fire of oxygen.)

Typically, a ship of 43,000 gross tons would carry 1,100 passengers and crew, a number that shrinks the open space on a vessel. But the average number of passengers on The World is 200, a figure that makes it possible for ResidenSea, the Miami-based firm that manages the ship on behalf of resident owners, to create an experience akin to life in a small luxury resort – except this one transports residents to the world’s finest destinations.

Privacy is a key selling point, and the ship is treated as the private home of its residents. It is not a tax haven (as some assumed) – to become a resident, you must have a permanent land address. About half the owners (most are in their early 50s, but ages range from 35 to 85) are American. The rest are Europeans and Asians with a smattering of Canadians. Residents spend three to four months on board, although most spread that time over the course of a year. 60% of residents have never been on a cruise line before, but 75% have owned private yachts, and the private yacht experience is what The World tries to replicate.

Tom Barrack, arguably the world’s greatest real estate investor, is methodically selling off his U.S. real estate holdings as prices drive the market to nosebleed levels. He likens the current real estate market to a game of polo. “I feel totally safe playing polo on a field full of pros,” says the bronzed 58-year old. “But when amateurs are all over the field, someone can get killed. They have more guts than brains. They charge after every ball and don’t know when to hold back.” It is the same with U.S. real estate right now. “There’s too much money chasing too few good deals, with too much debt and too few brains.” The amateurs are going to get trampled, he explains, taking seasoned horsemen, who should get off the turf, down with them.

Investors take heed. Barrack may be an amateur at polo, but when it comes to judging markets, he is the ultimate pro. Arguably the best real estate investor on the planet, he runs a $25 billion portfolio of trophy assets, from the Raffles hotel chain in Asia to the Aga Khan’s former resort in Sardinia to Resorts International, the largest private gaming company in the U.S. Barrack’s Colony Capital, one of the largest private equity firms devoted solely to real estate, has racked up returns of 21% annually since 1990, handing investors, chiefly pension funds and college endowments – 17% after all fees. Barrack bought the Fukuoka Dome, Japan’s Yankee Stadium, in part because he calculated that the titanium in the retractable roof was worth as much as the purchase price.

His strategy is to buy classy but neglected properties anywhere in the world where prices are low. Then, he will pour in capital to fix them up, and resell in them in five years of so with their pedigrees fully restored. Says his friend Donald Trump, “Tom has an amazing vision of the future, an ability to see what’s going to happen that no one else can match.” Right now, Barrack’s view of the U.S. market could not be clearer: It is a great time to sell, and a terrible time to buy.

In the next few years of the George W. Bush administration, it is almost certain that there will be a number of contentious battles between Democrats and Republicans and between the White House and the U.S. Senate over certain federal court nominees. While the issues will appear to be substantive and far-reaching – and no doubt they are in the present-day U.S. – one needs to examine another perspective concerning the federal courts, one that demonstrates how far this country has drifted from its original moorings in liberty. Before the 20th century, the federal courts did not play much of a role in the daily lives of Americans. It is difficult to comprehend just how decentralized government power was in this country at one time, for even the structure of the various court systems ensured that the federal courts would not have much effect on the average person.

That state of affairs no longer exists. While the state courts still handle the bulk of criminal cases and lawsuits, federal courts have grown both in the size and in the numbers of cases heard. A federal criminal code that once had three crimes (piracy, treason, and counterfeiting) now contains thousands, and it is no exaggeration to say that most Americans at one time or another have violated a federal law for which there are serious criminal penalties. The violations mostly are made in ignorance, and the size of the U.S. population relative to what the federal courts can handle means that the vast majority of people will not be arrested or charged with anything. However, the huge numbers of potential federal “criminals” also mean that a large number of people who have no idea they have violated a federal law will be shocked to find themselves in the dock. On top of that, the civil dockets have metastasized, as the number of lawsuits filed in federal court by private individuals, businesses and corporations, and the government itself has expanded exponentially.

The federal courts did not grow on their own, nor does the U.S. Constitution create a large role for them. That the federal courts are the major players in the system of justice in this country is testament to the unconstitutional usurping of power by the three branches of the federal government. This development did not occur out of logic or necessity. The federal system did not grow simply of its own accord. Instead, the Leviathan we see today has come about because groups of intellectuals and lawyers actively sought to change the very meaning of law in the U.S. It was and is a sorry episode of U.S. history, one of many such affairs that have turned the nation’s legal system from a marvel to a slough of treachery, deceit, and unpredictability. The system of justice that once protected the innocent and held contracts and private property to be near-sacred entities, has become a mechanism through which lawyers legally loot businesses and rogue prosecutors regularly charge, convict, and imprison the innocent.

While the centralization of government began in earnest in the victory of the northern states over the Confederacy in 1865 and continued during the Progressive Era of the late 1800s and early 1900s, the process reached warp speed during the 1930s, the period we know as the New Deal. The legislative agenda that President Franklin D. Roosevelt sought to impose was collectivist in nature and clearly went against the emphasis on individual rights that reflected the core philosophy of those who wrote the Constitution. Although the U.S. Supreme Court resisted the New Deal during Roosevelt’s first term, ultimately the president was able to push his agenda by remaking the High Court, which became little more than a rubber stamp for policies that made a mockery of rule of law and of the rights of individuals. As I shall demonstrate in this series, the Roosevelt administration inflicted damage on law in the United States that was both wide and deep.

However, regime changes do not occur in a vacuum. While the U.S. Supreme Court in 1935 held to some of the vestiges of constitutional government, the intellectual breakdown had begun long before the courts finally caved in to Roosevelt and gave him the powers he coveted. Changes brought about by Franklin Roosevelt’s Court solidified the trends that had occurred since the Progressive Era, trends that could have come about only through viewing the U.S. Constitution in a way fundamentally different from what the Framers intended.

That the New Deal justices were able to absolutely subvert the Constitution – and with it, the rule of law – and do it without meaningful opposition from Congress and the Fourth Estate constitutes one of the darkest chapters in American history. A nation that was conceived in liberty and limited government has become a country where almost no meaningful limits are placed on those who are in authority, all with the approval of the courts, which were supposed to be one of the bulwarks against such action.

To be able to fully gauge the effect that the New Deal has had on our lives today through the Supreme Court, a deforestation of North America would be needed to write a volume large enough. However, there are two consistent themes that have emerged in the past seven decades. The first is that private property is considered to be an anachronism, useful only insofar as it serves as a mechanism to raise tax revenues for government. The second is that the U.S. Supreme Court and all U.S. courts, federal and state, are expected to be movers and arbiters of social change. To put it bluntly, the courts see themselves as having a mission to implement the policies of the Progressive Era. Unfortunately, what the political classes see as being “progressive” actually is little more than a regression into tyranny in which the state has absolute power.

New federal wiretapping rules forcing Internet service providers and universities to rewire their networks for FBI surveillance of e-mail and Web browsing are being challenged in court. Telecommunications firms, nonprofit organizations and educators are asking the U.S. Court of Appeals in Washington, D.C., to overturn the controversial rules, which dramatically extend the sweep of an 11-year-old surveillance law designed to guarantee police the ability to eavesdrop on telephone calls. The regulations represent the culmination of years of lobbying by the FBI, the Justice Department and the Drug Enforcement Administration, which have argued that “criminals, terrorists and spies” could cloak their Internet communications with impunity unless police received broad new surveillance powers. The final rules, published this month by the FCC, apply to “any type of broadband Internet access service” and many Internet phone services.

“The concern is that what is being proposed is inordinately expensive to achieve the results that the FCC and the Department of Justice would like to secure,” said Sheldon Steinbach, general counsel to the American Council on Education, which filed its legal challenge late Monday. The rules are set to take effect in April 2007. Another legal challenge from businesses and nonprofit groups is impending. “The FCC simply does not have the statutory authority to extend the 1994 law for the telephone system to the 21st century Internet,” said Marc Rotenberg, director of the Electronic Privacy Information Center, which is joining the second challenge. Also participating are the Center for Democracy and Technology, Pulver.com, the Electronic Frontier Foundation, and the telecommunications trade group CompTel.

The 1994 law, called the Communications Assistance for Law Enforcement Act or CALEA, required telephone companies to rewire their networks and switches to guarantee ready eavesdropping access to police. That prospect dismays privacy advocates and telecommunications providers who worry about the expense and argue that Congress never intended the law to apply to broadband links. A House of Representatives committee report prepared in October 1994 says CALEA’s requirements “do not apply to information services such as electronic-mail services; or online services such as CompuServe, Prodigy, America Online or Mead Data; or to Internet service providers.”

The new regulations also are alarming Internet phone service providers. Jonathan Askin, general counsel to Voice over Internet Protocol (VoIP) firm Pulver.com, said that his company is not directly implicated by the regulations because it currently offers only peer-to-peer conversations rather than links to the traditional telephone network. The new rules cover VoIP services that provide a “capability for users to receive calls from and terminate calls” to the phone network. But that regulatory forbearance may vanish in the future, Askin warned. “From a forward-looking policy perspective, I think the FCC has opened the door to regulating the entire Internet,” he said.

Link here. Grandiose schemes for electronic eavesdropping may hurt more than they help – link.

OFFSHORE EXPERT MARSHALL J. LANGER SUGGESTS HOW BAHAMAS SHOULD LEAD THE WAY

A week or two ago much was made of the fact that the OECD through its Financial Action Task Force (FATF) had informed the relevant bodies that The Bahamas was no longer being monitored by the FATF, for now. No word was mentioned, however, about leveling the playing field, a position that the Minister of State for Finance Senator James Smith had said had to be a starting position for negotiations between The Bahamas and the high-tax regimes that operate through OECD about any changes or agreements that would be made between The Bahamas and other countries.

The reality is, however, that the field will never be level and it is in recognition of this fact that Marshall J. Langer in a recent presentation at a Bahamas Financial Services Board-sponsored seminar made some suggestions on how the jurisdiction could retain its competitive edge without losing face. According to Mr. Langer, a noted specialist on taxation regimes, it is possible for countries like The Bahamas to propose win-win arrangements between what he terms “high-tax countries and no-tax countries”.

Mr. Langer is proposing that countries like The Bahamas, where financial centers are under attack from the OECD, should look at what he calls “limited revenue-sharing tax arrangements”. These arrangements would apply only to “bona fide resident individuals but not to companies or other entities”. And Mr. Langer’s proposal applies only to individuals because much of the financial services is driven by high net worth individuals who are particularly keen about keeping as much of their money as legally possible for their use as oppose to having it taken away by onerous tax schemes.

Mr. Langer pointed out that it was critical that the stakeholders in both the public and private sectors take the initiative and approach countries within the OECD like Austria and Iceland, and establish arrangements based on his suggested win-win model. The model, which he calls the Limited Revenue-Sharing Tax Arrangement (LRSTA) has certain characteristics, not least of which is “mutual trust and confidence” between the two countries, which would eventually evolve into more comprehensive tax treaties or agreements. Mr. Langer notes that it would be “less comprehensive than a typical tax treaty” but at the same time provide more benefits to the contracting parties than the usual tax exchange agreement (TIEA) one of which The Bahamas has with the USA. The importance of countries like The Bahamas seizing the initiative and pushing their agenda becomes readily apparent upon viewing the more critical LRSTA components.

All U.S. passports will be implanted with remotely readable computer chips starting in October 2006, the Bush administration has announced. Sweeping new State Department regulations say passports issued after that time will have tiny RFID chips that can transmit personal information including the name, nationality, sex, date of birth, place of birth and digitised photograph of the passport holder. Eventually, the government contemplates adding additional digitized data such as “fingerprints or iris scans”.

Over the last year, opposition to the idea of implanting RFID chips in passports has grown amidst worries that identity thieves could snatch personal information out of the air simply by aiming a high-powered antenna at a person or a vehicle carrying a passport. Out of the 2,335 comments on the plan that were received by the State Department this year, 98.5% were negative. The objections mostly focused on security and privacy concerns. But the Bush administration chose to go ahead with embedding 64KB chips in future passports, citing a desire to abide by “globally interoperable” standards devised by the International Civil Aviation Organization, a UN agency. Other nations, including the UK and Germany, have announced similar plans.

The State Department claims it has addressed privacy concerns. The chipped passports “will not permit ‘tracking’ of individuals”, the department said. “It will only permit governmental authorities to know that an individual has arrived at a port of entry – which governmental authorities already know from presentation of non-electronic passports – with greater assurance that the person who presents the passport is the legitimate holder of the passport.” To address citizens’ concerns about ID theft, the Bush administration said the new passports will be outfitted with “anti-skimming material” in the front cover to “mitigate” the threat of the information being surreptitiously scanned from afar. It is not clear, though, how well the technique will work against high-powered readers that have been demonstrated to read RFID chips from about 160 feet away.

Privacy advocates said the anti-skimming device was a decent start. But if the cover of the passport happens to be open, all bets are off, said Bill Scannell, a privacy advocate who founded the site RFIDkills.com. “They’ve built little baby radio stations into peoples’ passports and covered it with concrete but when the little hatch is open, you can still hear the music. It’s better than nothing, but why take this risk?”

The 1980s were the decade of the speculator – and now, 20 years later, we have such a window of opportunity again. Successful speculators should emerge from the first decade of the 21st century wealthy beyond their wildest dreams. Fortunately, it is a profession open to all. No formal education, credentials, or licenses are required. All training is on the job, and best of all, the apprenticeship is “earn while you learn”. It is an appealing job opportunity, but unfortunately one that carries a stigma.

I have been known to talk about a lot of suspiciously asocial concepts: financial crash, depression, hyperinflation, the alternative economy, hoarding. They are all buzz words that arouse vivid images and strong emotions. Perhaps the most powerful word of all, however, is “speculator”. It sounds so irresponsible, opportunistic, and dangerous. Politicians and the media throw the word speculator about so abusively. I suspect few people have ever dared to ask what one really is. In the popular mind a speculator is someone associated with shortages, price hikes, wars, natural disasters, and other calamities. A speculator is simply someone who sees, or anticipates distortions in the marketplace and positions himself to take advantage of them. He can do that because he understands their causes, and their effects.

Speculation will be the foundation of dynasties in the turbulent years ahead. The original Baron Rothschild knew how to profit from the politically created chaos of the French Revolution era. He became rich and famous by following his own advice to “buy when blood is running in the streets”. If you are the least bit attentive, the longer-term risk/reward profile for the speculator is in an entirely different league than that of the “conservative” investor.

These days, while the chattering masses are frantically looking for safe harbors against the gathering storm, the speculator is accumulating positions in the quality gold companies. While gold is more in the news than it has been in years, the average investor still views it skeptically, thinking gold investors are somehow goofy. As you will read below, that makes this a nearly ideal time to load up – though buying aggressively early last year when few wanted to know about gold was better.

Investing for income is the kiss of financial death. Why have any of the great millionaires of the past not taken advantage of the simple gimmick of compound interest to eventually take over the world? (If the Indians had invested their $26 for the sale of Manhattan for a 5% compounded return, their money would be worth $2,790,729,193. today). It is not because they have not tried, I am sure. It is because no investment will give you a true 5% for even the length of a lifetime. In fact, there is probably nothing that can be relied upon to yield even 3% over more than 40 or 50 years. It shows the futility of trying to stay ahead in any type of “secure” investment. Everything is a speculation, whether people know it or not; those who settle for a low but “secure” return are penny-wise and pound-foolish in the most profound sense.

When you settle for a “conservative” return, even the slightest miscalculation, bad luck, or government fiat can wipe you out. Taxes will always erode your capital, directly or indirectly. Inflation, for the foreseeable future, is sure to get worse and fluctuate wildly as it does. Banks and insurance companies – the very institutions that have always gotten away with offering low yields because they were so stable – will fail as they always have … especially given the current overvaluation of most U.S. real estate and the underlying loans that are looking increasingly shaky. The government itself will eventually be replaced and currency will become worthless. And there is no way to truly protect against the risks of war, theft, fraud, and natural disaster. Investing for income – especially in today’s climate, when cracks can be seen in the foundations of society itself – is the height of stupidity.

If you invest for income, you are handing over responsibility for your future to others. You do not know what they are doing with your money, you cannot know how intelligently they are going to conduct themselves in the future, and you do not even really know how sound their capital position is. That is a bad enough set of fundamentals for a madcap gamble, but in return for a simple yield, it is absurd. What, then, to do? What is the method to overcome this madness? The only answer I know of is to lay a solid financial foundation, and then gather up your cash and your courage and learn the art of speculation. Below you find some general rules of successful speculation, in summary. Decide for yourself how they match up with the opportunities present in gold and other resource stocks today.

Asia’s private bankers are a happy lot. Not only are they working in a region where booming economies are churning out millionaires faster than the millionaires can hire private bankers, but they are also on the receiving end of an accelerating inflow of money from Europe. Since July 1, the 25 member nations of the EU have agreed under a new regulation, the European savings tax directive, either to share with each other information on residents’ cross-border savings income or levy a 15% withholding tax, which is to rise to 20% in 2008 and 35% from 2011 onwards. The withholding tax option is also being applied, on a “voluntary” basis, in dependent tax havens such as the Isle of Man, the Channel Islands, the Cayman Islands, the British Virgin Islands and the Netherlands Antilles, as well as in several neighboring European financial centers, including Switzerland, Liechtenstein and Monaco.

Hard data are virtually impossible to come by in this traditionally secretive sector. But Roman Scott, director of the Boston Consulting Group in Singapore, estimates that the new levy could cause at least €1 trillion, or $1.2 trillion, to flow out of Luxembourg and Switzerland alone into other financial centers around the world, with a “significant” amount coming to secure Asian tax havens like Singapore and Hong Kong. Compared with a total of about $35 trillion held by European private investors, and a world total of $85.4 trillion, this would be a relatively small outflow number, Scott said. Still, it puts some extra butter on Asian wealth managers’ daily bread.

There is a “perception by European investors that the offshore management centers in Europe have become overly accommodating to the pressure of the EU,” said Rolf Gerber, chief executive of LGT Bank in Liechtenstein (Singapore). “Whether this is true or not can be debated, but it's all about perception.” Mr. Scott said the levy had helped trigger a “psychological shift in investors minds.” Investors were reading it as a signal that the EU was cracking down and showing zero tolerance for tax avoidance, he said. Still, like many other Asian private bankers, Renato de Guzman, the chief executive of ING Asia Private Bank, said he believed that the strength and growth potential of Asian markets was the main attraction for European money flowing into Asian havens like Singapore and Hong Kong.

Four years after the attacks of September 11th 2001 put the “war on terror” at the top of George Bush’s agenda, political pressure from America, Britain and, more recently, the UN, has resulted in this: scores of bankers, fund managers, accountants and solicitors on the lookout for terrorists around the world. “Money is the lifeblood of terrorist operations,” declared Mr. Bush. “We’re asking the world to stop payment.” Tony Blair has beaten the same drum more loudly since the attacks in London on July 7th. Governments from Australia to Bangladesh and Paraguay have ratcheted up their political rhetoric too. Yet deadly attacks keep coming – most recently in Bali, Indonesia on October 1st.

The private sector bears the major burden of the effort to choke off funding for terrorists. Banks and other financial institutions are scanning their customer accounts more carefully for signs of suspicious people and transactions. Accounts have been frozen and foreign banks have been cut off from doing business in dollars if America is not satisfied that they are properly sharing information.

Millions of prospective and current customers are hampered by tougher compliance standards. To open an account or transfer money these days means numerous demands for identification – a passport or driver’s licence with a photograph. Customers have grown used to delays in gaining access to their own money. There are growing requirements for disclosure of detailed information on business directors and funding sources. All this means additional fees. Expatriate executives, international-exchange students and low-wage workers wiring money to their families abroad have been most affected. The compliance costs for financial institutions are substantial.

Graham Dillon of KPMG, a consultancy, says anti-money-laundering technology is focused on identifying suspicious transactions that bear little resemblance to those typically used by terrorists. He contends that current technology could be reconfigured to check for things that better fit the profile of terrorist financing – liquidating accounts, for instance (what one might expect of a suicide-bomber) or purchasing high-risk materials. But he is not aware of institutions doing this now. “There’s a high probability that institutions have not learned from Madrid, 9/11 or the London bombings in relation to re-enhancing their systems against terrorist attacks,” he says.

Meanwhile, the compliance staffing and services industries are booming. The result has been a veritable flood of data on customer transactions deemed suspicious. Ironically, the welter of paper has prompted some authorities to ask financial institutions to file fewer, better quality reports. Without sufficient resources to process the reports, backlogs mount and many cases are never carefully reviewed. In developing countries, law enforcement is too corrupt or inefficient to process them all.

Banks comply with the rules for two primary reasons: fear of sanctions, and worry about their reputations. Should they fail to toe the line, the Patriot Act essentially cuts off foreign institutions from business relations with America. That provision “scared the living daylights out of the rest of the world”, says a security consultant. In more zealous places like America and Britain, the dragnet requires the filing of suspicious activity reports by lawyers, accountants and insurance companies as well. Las Vegas casinos are screening high rollers. Even yacht brokers and jewellers have been told to report buyers who try to pay with big rolls of cash. Yet all this effort has yielded depressingly few tangible results.

For KPMG’s Mr. Dillon, the resources already spent on the effort have handed a victory to the terrorists. “The cost to our global economy is so large, they’ve already had the effect they wanted,” he says.“qThe increasing costs of compliance and technology are a form of terrorism. We’re damaging ourselves.”

And so it came to pass that that the OECD and FATF black-listed much of the Caribbean region’s offshore financial services sector as “a bad egg”, traditionally robust banana and sugar exports were “dead”, tourism was growing but in some markets reaching saturation or stifled by poor infrastructural facilities, telecoms deregulation has failed to deliver call center jobs (or much else), “foreign aid” to the region is flat or down, whilst the “brain drain” of locals to the “developed” world is alive and well. To top it all off, we are now going into only the middle of a 10 year cycle of increased hurricane and storm seasons and so vulnerable to impact. Which community can sustain such shocks?

How will the Caribbean countries sustain and manage such shocks since most of the economy runs on these key industries, and can be brought to its knees by a devastating storm? To my mind, there are four major industries that we now or will soon be depending on to offer jobs to the thousands of kids annually coming onto the job market, for the foreseeable future: Telecoms and ICT (information & communications technology), bananas and sugar, tourism, and international financial services. There are also two sub-sectors: agriculture (excluding bananas and sugar which I do not consider “dead”), and manufacturing, which I think will never produce much more than that required for local consumption, if anything at all, with a few exceptions. Local (i.e., regional) consumption of local agriculture and manufactured goods by rising standards of living and populations, influxes of “ex-pats” and foreign investors and by the growing tourism sectors will keep efficient suppliers and producers happily in business.

It is easy for some to brush off the “offshore” industry with visions of tax evasion, money laundering, tax havens and other such nefarious activities stuck in their heads, but like everything else, it is not that simple or true. In our small Caribbean islands, these bad things happen sometimes, though relatively rarely, but the global clean-up of legislation and compliance has put the modern regional offshore industry on a sound footing. Please note by the way, that most of the “naughty” activity that went on and indeed sometimes goes on, in fact does not go on in some small Caribbean island, but in New York, Miami, Paris, Toronto, Hong Kong, Singapore, London and other major cities.

Death and taxes are the two things “you cannot escape” they say … and it is true. However, while there is not much we can do about death (outside of diet and exercise, so to speak), there are a few things we can do about taxes. For example we can become elected officials and pass legislation to reduce the size and cost of Global Government and all of its attendant waste and inefficiencies. Yeah, right!

Or we can lobby the global elected officials as many do, notably the U.S. flat-tax guru Steve Forbes, and whilst a noble long-term cause, how long will that take? Death might work its magic before we can. Or one can go offshore. Not physically anymore. It does not matter where you live, work or play. “Offshore” is like the proverbial grass pasture being greener on the other side, but like every patch of grass, its really only green where you water it.

A few weeks ago, Sierra Atlantic, an outsourcing company that specializes in writing business software, did something unusual. It invited employees at its Hyderabad office to bring their spouses to work. There, counselors offered sessions on better relationships, good parenting and work-home balance. Sierra Atlantic’s “Bring Your Spouse to Work” and “Bring Your Parents to Work” programs are among the new benefits and strategies that outsourcing companies in India are using to retain employees in an increasingly competitive market for skilled English speakers.

Annual salary increases of 10% or more are now the norm in India’s outsourcing industry, which supplies workers who write software code, answer customer service calls, conduct legal and equity research and do engineering design for overseas corporate customers. But despite rising pay, outsourcing companies are facing annual attrition rates of 15% to 30% in their Indian labor force, compared with 10% attrition at outsourcing companies in Eastern Europe and between 7.5 and 15% in China, according to industry experts.

Labor shortages and employee turnover are affecting other high-growth sectors in India, like financial services, retail and airline industries, but nowhere is it as pronounced as in the outsourcing area, valued at $17.2 billion a year. “High turnover, rising wages and a shortage of suitable talent in India’s most popular offshoring destinations are proving to be bottlenecks,” said Diana Farrell, director of the McKinsey Global Institute, an economics research firm based in San Francisco. Nandan Nilekani, chief executive of Infosys Technologies, the second-largest outsourcing company in India after Tata Consultancy Services, said that employee turnover was now one of the biggest challenges for the growing Indian outsourcing industry.

Competition has become more intense as demand rises faster than the supply of trained workers. Even with higher pay, Indian engineers are still paid a quarter of what their U.S. counterparts earn, which is what has driven the outsourcing boom. According to the National Association of Software and Service Companies, a trade group in India known as Nasscom, the country produces three million college graduates every year, of which 350,000 are engineers. “It is great raw material, but only 30 percent of this pool is ready to plunge straight in and deliver,” said Kiran Karnik, president of Nasscom. Improving the quality of that pool, Karnik said, is on the industry’s “A-list of challenges”.

The problem of employee turnover is even more acute for outsourcing companies that offer lower-skilled back-office work like call-center services. Once trained, those lower-paid workers tend to hop from job to job. Some outsourcing companies in that sector are reporting a complete turnover of employees in the span of a year. Frances Karamouzis, a research director at Gartner, said that while growth in the outsourcing business would continue in the near future, the attrition problem would “be looked upon as the early signs of the limits and boundaries around the India model.”